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Let’s Talk About Royalties, Shall We?

They may be on strike, but the WGA folks are still amusing me. The “Why We Fight” video is everywhere these days, and the first few seconds of it never fail to make me laugh.

When an author writes a book, they get paid for every copy sold.

I’ve written a couple of (small) books. I was also a Licensing Administrator for a publisher, which means that I was the person who filled in the blanks on the contracts, made sure they were signed and then mailed out the checks to the authors for every copy of their book sold. I’m also currently writing my own fiction books, and am very up to date on the fiction publishing market.

Now, the WGA video shows a Harry Potter book cover when it’s talking about the money authors make. Trust me right now when I promise you that J.K. Rowling is one of a kind as far as book earnings go.

Let’s walk through a more typical author’s contract.

1. It starts with an advance.

A typical advance for a first-time author in the paperback market is $5,000. When you sign the contract, you get a check. Now, if you have a good agent you may get more. I’ve heard of $25,000 advances and I’ve also heard of book auctions where an exceptionally saleable book earns a million dollar advance. Of course, while they do happen, they’re rare. Very rare. If you write a book and hope to sell it, set your sights on that (more typical) $5K.

Now the important thing to know is that “advance” means “advance against royalties”.

2. Royalties

Royalties are what you earn for every copy sold. When people think of themselves writing a book, they often dream of walking to the mailbox and pulling out a check for a couple thousand dollars a month. Those royalties sure sound sweet, don’t they? The WGA, when talking about their Residuals (the comparable equivalent to Royalties) likes to point out that Residuals get them through lean times and are enough to pay mortages.

There are several ways to structure royalties in the print business, and over the years they’ve gotten more obscure and difficult to decipher. For the sake of this example I’m going to go with a straightforward 10% of wholesale. If you buy a paperback book for $6.99, the publisher most likely sold that book for around $3.50.

Our fictional author would then get 35 cents, right? Sure.

But don’t forget that Advance!

3. The Earn Out

Before an author ever sees a royalty check, his work must first earn out. Remember our $5,000 advance? Well, the publisher pays himself back with the first $5,000 worth of royalties the book earns. That’s why it’s called an “advance against royalties.” In our case (10% of the $3.50 wholesale price) that means that you would have to sell 14,286 copies of your book in order to earn out your royalty. Of course, I’m keeping the example simple. We’ll not even go into the hell of sliding scales, multiple rates for multiple vendors, etc.

4.The Recoup

Here’s the important thing if you ever write a book and get a contract. Make sure your advance is non-recoupable. In other words, if you get that $5,000 check you don’t want to have to pay any of it back. If you have a recoupable advance and your book only sells 10,000 copies, you have to pay back $1,500. You don’t want to do that. If the advance is non-recoupable, then the publisher just eats whatever amount doesn’t earn out.

Now, of course, I’m talking about publishing. And I brought this all up in light of the WGA strike. I made a lengthy post about it because I think alot of people are curious about how authors get paid for their work.

Tying it all back to the WGA strike, I want to make something perfectly clear. Residuals are NOT royalties. No matter how they try to spin it, residuals are a different animal altogether. The only comparison–besides starting with the letter “r”–is that they are payouts per individual sale. WGA authors don’t have an Advance, nor do they have an Earn Out. If you write a TV show, you get paid for your script.

The WGA per-week minimum for television staff writers ranges from $2,457 to $3,117 depending upon how many weeks are worked. The credited writer(s) of a sitcom episode gets a minimum of $17,000 and may also qualify for residual payments for subsequent showings and syndication. Flat rate for film scripts has two levels: a low one for films budgeted at less than $2.5 million, and a high one for those over that. The flat fee minimum for an original screenplay is $38,303 (low budget) and $71,847 (high budget). As in the case of actors, these are merely minimums and a screenwriter with a good track record will earn more. There are probably fewer than 3000 members who earn a regular living at writing, and of those the average salary is about $50,000 per year.

In other words, they get $17,000 no matter what. That’s different than a print author–by far.

I’ve said it before and I’ll keep saying it. I have nothing against the WGA members fighting for residuals. If they can get it, great. But they need to realise that comparing scriptwriting residuals to bookwriting royalties is apples to oranges.

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6 Responses

I urge you to see the facts on the video I’ve posted about what the WGA is really asking for and what they are and aren’t getting.

Your figures on scriptwriting are not correct. You do not consider if the film is signatory to SAG. Yes, there is a minimum
for both AFTRA and SAG, (again, I worked with both extensively) and you are not in any way representing what the writers are asking for in this strike accurately.

The video is only three minutes. Please. Watch it.

The only thing you’re correct about is the huge difference in royalties and residuals in book vs screenplays.

But unless the show is work for hire, the writers are due certain residuals, and contrary to what you posted the other day, online residuals is a growing part of it. In fact, it’s a big art of it You stated you didn’t know there was any money in online.

Again, please consider watching the 3 minute video I posted, which is factual.

Forgive me for commenting out of ignorance but from what I’ve heard, aren’t the writers looking for a piece of the re-re-broadcast of their works? How many writers get a royalty when the book is sold from a used book store?
I realize that’s an imperfect analogy. Just looking for some clarification.

aren’t the writers looking for a piece of the re-re-broadcast of their works?

The problems with the Royalties=Residuals analogy are multiple, which is why I wish the WGA would stop using it. Broadcast media simply cannot be quantified in the same way as hard media (like books and CDs). The only thing which comes even remotely close to a comparable earn-out structure is pay-for-play (ie. the iTunes/Unbox model.)

Essentially the concept of “Residuals” is an attempt to fit a square peg into a round hole. Residuals are an attempt to reimburse the writer for high-quantity consumption and as such are not a bad idea. (They’re the closest thing WGA writers have to a merit-based pay system.) Residuals are supposed to be a payout for every time the work is viewed.

But the internet doesn’t–and won’t–work that way. Just yesterday or today the WSJ announced they were abandoning their subscription model in favour of pursuing a larger footprint by offering their online content free of charge.

The twofold tech earning structure of the future is going to be not a lot different than it is now–either payforplay or loss-leader free content. And from where I sit, this fight for residuals looks like a lot of people demanding a percentage of loss-leader earnings.

I’d stick to my guns and demand a) a higher base rate of pay on all loss-leader items and b) a percentage of pay-for-play sales.

In other words, if my show streams on NBC dot com, I’d demand to be paid an extra percentage above my standard pay. If my show is sold on iTunes for $1.99 a pop, I’d demand at least one cent per sale.

That’s going to be the only way to earn out residuals in the tech revolution.

But, seriously, I think that the main problem is a lot of these folks need to realise the world is changing. They’re going to have to face those facts and wean themselves off the “residual” concept.

From what I hear, the NBC Direct model sucks.
(Hope I can post links)
Everyone seems to be scrambling to stake out their bit of new territory while using all the old rules.
Seriously, when you had to work 12 hours a day, 7 days a week in a coal mine in a company town; unions made sense. A writer’s union? I’m not even clear who it is they are striking against.
BTW, thanks for the answer. Thought I was the only one still awake. I bookmarked you during the “drama”. I’ll have to drop by more often.

Writers’ Advice

"Read, read, read. Read everything -- trash, classics, good and bad, and see how they do it. Just like a carpenter who works as an apprentice and studies the master. Read! You'll absorb it.
Then write. If it's good, you'll find out. If it's not, throw it out of the window."
— William Faulkner